What Are the 4 Different Types of Tenders? (And How They Work)

Tendering is a crucial process in project management. It’s basically how the government and corporates pick who gets to do big projects or provide services. It ensures that the right contractors or suppliers are selected for a job. It’s supposed to be fair so that anyone who qualifies can have a shot. 

However, not all projects are the same. It can get very confusing because there are different types of tenders, and each one works in its own way. Understanding the types of tenders helps businesses and contractors prepare competitive bids and improve their chances of winning contracts. 

While many sources mention 5 types of tender, the most commonly used tendering methods fall into four main categories. In this guide, we’ll break down the four key types of tenders, how they work, and when they are used.

1. Open Tender

This is the one where anyone who meets the requirements can participate. It’s also called public tender. It is one of the most transparent bidding methods. The tendering authority advertises the project, and bidders submit their proposals. It’s the most open and competitive method, which means lots of people apply, and it can be tough to win. In these tenders, selection is based on technical and financial evaluation. 

It’s best for large-scale government and infrastructure projects. For example, if the NHAI wants to build a highway, they’ll post an open tender. Here, all qualified construction companies can send in their proposals. The one that meets all the conditions and offers a good price usually wins. 

Suppliers and contractors who can meet the broad eligibility requirements should participate in open tenders.

2. Selective Tender

A selective tender invites only a specific group of pre-qualified contractors or suppliers. This one is different because not just anyone can bid. This is mostly for specialized projects where they need experienced companies. The authority shortlists bidders based on their past experience, financial stability, and technical expertise.

Key Features:

• Only invited firms can participate.
• Used for complex and high-value projects.
• Ensures quality and reliability by filtering bidders.

The Indian Railways often uses selective tenders for high-speed train projects, choosing only companies with proven expertise.

3. Negotiated Tender

A negotiated tender involves direct discussions between the buyer and a single contractor.  Here, there’s no big bidding process. This usually happens when there’s an emergency, or the project is super specific, and only one company can really handle it.

A good example was during the COVID-19 pandemic. The government needed medical supplies fast. So instead of waiting for tons of companies to submit bids, they directly negotiated contracts with manufacturers who could deliver quickly. They used negotiated tenders for emergency medical equipment procurement.

Key Features:

• No competition; only one company is awarded the project.
• Speeds up procurement in urgent situations.
• Common in defence, healthcare, and government projects.

4. Two-Stage Tender

This method is used when a project is complicated, and the buyer isn’t sure about all the technical details yet. A two-stage tender involves an initial round where bidders submit technical proposals without pricing. In the first stage, companies submit their ideas on how they would handle the project. In the second stage, selected bidders provide financial quotes.

Key Features:

• Separates technical and financial evaluation.
• Ensures better project planning before cost estimation.
• Used for highly technical or uncertain projects.

A good example of this was India’s bullet train project. The development of India's bullet train project used a two-stage tendering process to assess technical feasibility before finalizing costs.

Also Read: Essential Documents for Tender Submission

Which Type of Tendering Method Should You Choose for Your Project

If you’re trying to figure out which type of tender is best for your business, it really depends on what kind of work you do. The type of tendering you should go for will then depend on a lot of factors. Like project complexity, urgency, budget considerations, and the need for specialized expertise. 

If you’re new and want to compete, open tenders give you a good chance. But they’re tough because there’s a lot of competition. If you have experience, selective tenders can be great because fewer companies get invited. If you’re already working with an authority or company and they trust you, negotiated tenders can be a good way to land more deals without too much hassle. Understanding the different types of tenders is the first thing you need to do to make the best choice for your specific needs.

For large and complex projects, such as the construction of a hospital, selecting the right tendering method is essential to ensure quality and compliance with industry regulations. In such cases, they’ll probably go for selective tendering. A random construction company with no experience in healthcare buildings won’t get invited. Since healthcare buildings require expertise in medical infrastructure, it is important to invite only qualified contractors with experience in similar projects. 

Now, let’s say they have not fully finalized project details yet. Then, a two-stage tendering process can be done. This will involve the contractor early. So, they can discuss on costs and design before finalizing the contract. 

However, if the project were urgent, such as the rapid construction of a COVID-19 emergency hospital, negotiated tendering might be the best choice to speed up the process and ensure quick delivery.

Final Thoughts

Understanding the types of tenders helps businesses choose the right opportunities and prepare better bids. Whether it's open, selective, negotiated, or two-stage tendering, each method serves a specific purpose in procurement. At the end of the day, tenders are just different ways for businesses to get contracts. Some are open to everyone, some only allow selected companies, some involve direct negotiations, and some are done in stages. If you’re a business, knowing which one fits your situation can help you bid smarter.

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